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Vision 2030: a leap forward for Saudi Arabia?

Vision 2030 is an ambitious renovation programme for Saudi Arabia officially showed to the international press last April by the Saudi prince Muhammad bin Salman. The prince is a rising leader in the new Saudi top leadership after his father was proclaimed King in 2014 and is trying to carry on an historical change for the Saudi society. MbS, as many international newspapers name him, is the main author of the Vision 2030 plan defined by the Financial Times as the most important renovation plan in the history of the country. The main goal is to diversify the national economy to overtake the current dependence on the oil export after the crude oil price fell in the last years. A turning point in a complex framework that saw important decision taken by the Saudi establishment to face the geopolitics challenges of a rising Iran and a complicated world energy market situation. Daring projects like the construction of KAEC – King Abdullah Economic Citythat we have analyzed in detail, offering plenty of opportunities for foreign companies approaching the Saudi market.

The oil price fall, together with the strategic goal to boost the competitive strength of Saudi economy after the implementation of the international agreements on Iran, are inspiring historical decisions in the Saudi leadership. Decisions that are often controversial, like the intervention in Yemen against the Houthi rebels, and the rising tensions between the Saudi royal family and the religious power that are foreseen by many commentators as soon as the Vision 2030 plan will be implemented.

Saudi Arabia experienced a 3% growth in its GDP in 2015, together with a negative impact of the oil price fall and the massive use of the monetary reserves that appeared way too quick and intense: the central bank burned more than 30 USD billions per month in the first six months of 2015 with several negative forecasts by the IMF and top press columnists worldwide.

MbS is taking important decisions, like a prime minister, and approved a drastic spending review with a -25% cut in the government spending, a massive cut on hydric and energy supply subsides to the citizens and a complex renovation plan on the administration offices of the Saudi government structure. The national development plan involved the introduction of the VAT (from 3% to 12%), an increase in the IT and technology employees, the +25% aprox increase in five years in the medical industry, and the 50% railway infrastructures and 70% of the ports handed to a private management system (quite relevant if we think about the future role of the KAEC city port, that should compete with Dubai port in the Saudi government ambitions).

Government plans that should increase the touristic, energy and naval industries employees by 450.000 units in next years, with a +50% growth expected in the key manufacturing industries of the plan. Some measures involve the current foreign direct investment regulations, with insolvency law and a renovated bankruptcy law that should encourage foreign investors and boost the business opportunities. Top commentators say that the great leap forward implies a natural rising tension with the clerical power system, because it should turn Saudi people into actual citizens participating to the whole society development and evolution. It’s a quite relevant question mark and, eventually, a remarkable challenge for an emerging leader.